Beef costs too much

“A lot of people don’t want to admit it, but consumer demand for beef has been shifting to the left,” Helming says. “Market share continues to be lost and at least 95% is explained by relatively high cost, high price and the lack of affordability of beef.”

Close adds that, although it’s difficult to pinpoint an exact reason for the dramatic decline in U.S. beef consumption, it can be broadly attributed to cost, convenience and quality. In terms of convenience, he says preferences and buying habits of U.S. beef consumers have changed significantly since the 1970s.

“Consumers increasingly seek ingredients for quick meals, grab a quick burger on the go or simply shop for value. The industry production model must follow suit,” he says.

Then there’s cost and quality — which are related, but not the way logic might first suggest.

“The increase in retail beef prices relative to competing meat prices has simply driven consumers to more competitively priced protein options,” Close says. He uses the year 2000 as a baseline to explain that composite chicken prices increased an average of 2% annually the previous 13 years, for a total increase of 24%. Retail pork prices increased 41% during the same period — 2.7%/year. Meanwhile, Choice beef prices increased 72%, or 4.4%/year, while all beef prices increased 78%, or 4.6% annually.

The high price becomes more challenging in light of how real income in the U.S. has declined in the last six years for the first time since the Great Depression. Plus, Helming points out, there are 86 million baby boomers retiring or about to retire today, while the fastest-growing segments of the U.S. population are Hispanic and Asian — both of which tend to be lower-income groups on average.

“The beef industry has lost sight of what 90% of Americans can afford to buy,” Helming says. Consumer affordability also helps explain why, without fanfare, about 60% of all beef consumed in the U.S. today is in the form of ground beef.

Ground beef tops steak

Fact: In 1970, 42% of all U.S. beef consumption was in ground beef. It was 57% last year — a 38% increase.

Fact: Of domestic ground beef supply, 25% comes from native cull cattle and 15% from imports. The other 60% comes from fed cattle, equivalent to 42% of all of the cattle fed in the U.S. last year.

“All beef prices, as measured by the Bureau of Labor Statistics, have been escalating at a faster rate than Choice beef prices, indicating that while consumers continue to demand beef, they’re increasingly selecting lower-priced beef options,” Close says.

Helming says that consumption of ground beef has increased because of the high cost, high price and the lack of consumer affordability of whole-muscle beef cuts. “Demand for ground beef is largely price-driven. America today is a ground beef and chicken society.”

The conventional wisdom has long held that half of all beef consumption in the U.S. is ground beef. But Helming says, based on his extensive research, that 57% of all beef consumed in the U.S. was in ground form in 2013 — up from 42% in 1970.

Close goes further: “Based on the core data from the beef checkoff and the additional Rabobank retail sales research, we estimate ground beef, as a percentage of all domestic beef consumption, to be close to 62%. By any analysis, this proportion of ground beef consumption is astonishing and presents enormous implications for the U.S. beef cattle industry.”

This is where quality enters the picture.

“One of the greatest factors inhibiting greater efficiency in the beef industry and limiting its ability to compete with competitor proteins is the growing percentage of fed-beef primals that end up in the marketplace as ground beef,” Close says.

Though more than 60% of the carcass can become lower-value ground beef, Close explains the current production model demands feeding virtually all of them as if they were destined for the higher-value middle-meat market.

Quality isn’t the issue, Helming adds; it is affordability. “Ground beef in the U.S., in its various forms, is a very high-quality product. We don’t have a quality problem; we have a problem with how quality is defined in the beef industry, and with recognizing that beef consumers view ground beef as a high-quality protein.

“The industry has defined quality as being beef from cattle fed high-energy and grain-based feedlot rations to produce Prime, Choice and Select beef carcasses designed to produce expensive beef tenderloin, prime rib and steaks that consumers are buying less and less of because of lack of affordability. The beef industry needs to produce more lower-cost, high-quality ground beef that 90% of U.S. consumers can afford,” Helming adds.

As such, Close explains, “Under the existing business model, the U.S. cattle industry manages all fed beef as if it were destined for the center of the plate at a white-tablecloth restaurant.”

Discuss this Article 3

John R. Dykers, Jr (not verified)

on May 30, 2014

Our entire CharLean cutout could be grilled; Steaks, 'beef bites', ground round and patties. Ready to eat in 3 minutes. Always a good eating experience. Not worth the risk of a 'chewy' bite or improper cooking and the customer deciding chicken was better! Willing to pay for quality and consistent tenderness.johndykesmd@dykers.com

This debate always gets kind of silly because we seem to forget and not talk about one major fact. That fact is 14 out of the last 15 years we have seen the national cow herd get smaller! Yes there was drought but not for 15 years. Has anyone heard a cattle producer say "I got out of business because I was making too much money? I haven't. Beef is more expensive to produce and if we did it all with forage it would be even more expensive. There is no such thing as cheap grass. If we are going to produce cattle for a ground beef market who is going to line up to produce that cheaper feeder calf? Calves are bringing 1000 to 1400 dollars now. The line is going to be pretty short of producers willing to take 600 dollars for their calves so we can produce cost competitive protein.
We always forget history. In 1976 if you went into a grocery store the only chicken availble would have been a whole bird. Now there are thousands of heat and eat products. We have a product that is number one on most peoples list when given a choice, but, producers have to make a living to continue its production.